Daiwa keeps CapitaLand at Sell despite 3Q12 EBIT coming in 6% above its forecast. “The risks of rising imbalances (unsold inventory and a potential flood of new homes over 2013-15) in the residential market are higher than ever.”
While the key risk to its call would be a period of sustained resilience in home-sale prices and volumes and the government-policy threat removed, “the likelihood of this ideal soft-landing scenario is close to zero.”
It notes 3Q12 EBIT beat its forecast on higher-than-expected contributions from CapitaLand Residential Singapore and CapitaLand Commercial. Daiwa raises its 2012 EPS forecast by 19.4% as it no longer expects severe asset-value writedowns for the Singapore office assets, including associate CapitaCommercial Trust, and as it increases its retail-segment forecasts after CapitaMalls Asia’s strong performance year-to-date.
It raises its target to $2.49 from $2.35, pegged to a trough PER multiple of 12x forward EPS, after rolling forward to 2013 forecasts. The stock is up 0.3% at $3.28, for an around 48% year-to-date rise.
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